New report proposes seven reforms to cut construction fees passed on to buyers
Development charges now rank among the most expensive line items in Ontario housing construction, and the prohibitive costs are pushing homeownership further out of reach for buyers across the province.
The Ontario Real Estate Association released a policy report Wednesday calling for sweeping reforms to a system that evolved into a barrier to the very growth it was intended to support, proposing seven recommendations to modernize the framework governing these municipal fees.
In Ontario alone, Canada Mortgage and Housing Corporation (CMHC) found development charges could represent 8 to 16% of a new condo price and up to 9% of the cost of a single-detached home in Toronto.
Public sentiment shifts on development charges
Recent polling commissioned by OREA found growing unease among Ontario residents about how construction fees affect affordability.
The survey showed two in five Ontarians (42%) believe it is unfair to pass these costs onto homebuyers, and many agree that development charges make housing less affordable (71%).
"With today's economic uncertainties and rising cost of living, homebuyers need some relief when making the biggest financial transaction of their lives," OREA President Kim Fairley said.
"We need to champion a development charges framework in Ontario that supports existing communities while welcoming new residents."
The association proposed a temporary two-year suspension program to provide immediate homebuyer relief, alongside alternative financing mechanisms including municipal service corporations and utility districts to reduce upfront infrastructure construction costs.
Transparency concerns mount
Only 22% of Ontarians polled believed municipalities are transparent about how development charge funds are spent, the OREA survey found.
The report proposes implementing a direct-to-buyer billing model that would exempt development charges from additional taxes, cutting interest costs and eliminating tax-on-tax charges embedded in new home prices.
"Realtors understand that it costs a lot of money to fund infrastructure and support thriving communities," Fairley said.
"In order to create more housing options in the market and bring affordability back, we need to change the way we fund projects by working with all levels of government to address the root causes of escalating development charges."
Development charges were established to ensure communities have essential infrastructure while growth pays for growth.
Development charges are one-time fees levied by municipalities on new residential and non-residential properties to help pay for a portion of the growth-related capital infrastructure requirements.
If implemented, OREA's seven policy recommendations could simplify, standardize and align the province's development charge system so housing and infrastructure can advance together, helping more Ontarians afford homes in the communities they want to live in.
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